How Escrow Works

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• Tax statements
• Fire and other insurance policies
• Title insurance policies
• Terms of sale and any seller-assisted financing
• Requests for payment for various services to be paid out of escrow funds

First, a little about "escrow". An escrow holder is hired to assure your place closes on time and the money exchanging part of closing goes smoothly. A place is said to be in escrow when in the closing transaction, money is held by a third party on behalf of two parties (in this case, a buyer and a seller) when the exchange of money takes place. A simple way to understand what an escrow company does is to think of how you might use PayPal for online purchases.

The escrow holder insures that all terms and conditions of the seller's and buyer's negotiated agreement are met prior to the sale being finalized. This includes receiving payments and paperwork, filling out required forms, and obtaining the release documents for any loans or liens that are to be paid off with the transaction, assuring you have a clear title to your property before the negotiated price is fully paid.

Escrow companies look for the following pieces of paperwork:

Closing on the property happens when all of the procedures of the escrow are complete. At this time, all payments and dues for inspections, title insurance and real estate commissions are collected. Title to the house is then given to you as now current homeowner and related title insurance is issued as outlined in the escrow policy.

When closing is completed, you'll submit a payment to the escrow company. As your agent, I'll inform you of the acceptable form of payment.

A Mortgage Escrow Account is established to pay recurring expenses while there is a loan on the house. Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at closing.

Now you know more about being in escrow. And, you can be a more confident home buyer and future homeowner.